How will the Premier League’s Squad Cost Ratio affect football club valuations?
With the Premier League’s Squad Cost Ratio (SCR) rules now in place from the 2026/27 season, many are talking about the impacts on how clubs manage spending. However, the new rules are also likely to have a much wider impact beyond this one factor.
By linking squad costs directly to revenue and player trading results, SCR will likely remodel how owners and investors assess a club’s value during valuations. Revenue quality, stadium ownership, academy performance, player trading and commercial growth will all carry much greater weight, while the headroom available under the new rules may even become a key transaction metric.
In this article, Price Bailey’s Valuations Partner, Bryn Anderson, runs through these potential impacts, while also considering whether SCR will promote more sustainable business models, or just reinforce the high status of the league’s top-earning clubs.
How are football clubs traditionally valued?
With football clubs often being viewed as trophy assets, their valuations are inherently tricky and tend to subvert the norms. Unlike standard valuation conventions, they tend to neglect profitability and free cash flow, and instead look at the value of underlying assets, such as:
- Brand value
- Stadium ownership
- League status
- Player registrations
Additionally, valuations will factor in a club’s commercial upside, and triangulate it against a revenue multiple, typically adjusted for the metrics listed above, alongside financial performance, on-field performance and commerciality. The more favourable a club is on these metrics, the higher the revenue multiple applied.
What is SCR?
Squad Cost Ratio is the Premier League’s new financial rulebook, introduced for the 2026/27 season. It replaced the old Profit and Sustainability Rules, which measured a club’s losses over a rolling three-year period. SCR caps squad costs, wages, transfer amortisation, agent fees, and impairment, at 85% of revenue. This rule means a club’s income now has a direct relationship with how much it can spend on players.
How will Squad Cost Ratio change football club valuations?
SCR will fundamentally change how owners and investors assess football clubs, because it links what a club can spend directly to what it earns. Under the old rules, clubs managed profitability over a rolling three-year period and avoided exceeding a set level of losses. SCR shifts that focus onto revenue itself, since allowable squad costs are calculated directly from income.
That makes revenue more valuable in a way it wasn’t before. It still supports profitability and cash flow, but it now also increases how much a club can spend on players, linking commercial performance and sporting competitiveness far more explicitly.
For example: Manchester United’s commercial reach and Tottenham Hotspur’s ability to generate income from its own stadium put both clubs ahead of rivals without the same commercial infrastructure, and that gap now extends into what each club is permitted to spend.
As revenue holds greater weight, so does its quality. Investors are likely to look past the total figure and assess how reliable it is: recurring income, scalable commercial activity, sponsorship growth, hospitality revenue. Predictable income may command a premium, because it supports financial resilience and squad investment at the same time, a double benefit PSR never offered. This is also likely to place upward pressure on revenue multiples for clubs with high-quality, sustainable income, while clubs reliant on volatile or one-off revenue may see little benefit.
Promotion and relegation sharpen this further. A change in league status already moves broadcasting and commercial income significantly; under SCR, that same movement also changes how much a club is permitted to spend. Relegation can create a double impact, cutting both revenue and spending capacity at precisely the point a club most needs to invest to bounce back, which means valuations increasingly need to weigh the probability of promotion, survival and relegation, and a club’s capacity to manage each outcome, rather than applying a single multiple to current revenue.
SCR headroom to become key valuation metric
Because predictable income has become even more valuable, SCR headroom, i.e. how much additional squad expenditure a club could take on before reaching its limit, will become a key metric in valuations.
Football club transactions have traditionally focused on revenue, EBITDA, debt, squad value and stadium ownership. That will continue, but SCR headroom is likely to become a key metric alongside them, telling an investor how much additional squad spending a club could actually take on.
The picture is even more complicated for clubs playing Europe, as UEFA’s own Squad Cost Rule sets a more rigid 70% threshold. The practical constraint on a club’s spending may end up being whichever of the two regimes is stricter, so a valuation must ask whether European income is recurring or dependent on intermittent qualification, and whether the cost base can adjust smoothly if that qualification is later lost.
Stadiums: from commercial asset to regulatory asset
Although stadiums are already an important metric, their role is going to become even more important. This is because there is a direct link between the income they’re able to generate and the club’s squad spending ability.
Since roughly half of games are played away, there’s only a finite number of days a stadium is used for football activity, so even before SCR, clubs have looked to maximise their income beyond football.
For example, Tottenham Hotspur stadium hosts the concerts of renowned music artists and is also now home to a go karting track. Most stadiums will also sell naming rights.
Under PSR, these additional revenue streams only boosted a club’s profitability. Under SCR, they also increase future spending flexibility and improve competitiveness. This makes the stadium a regulatory asset, on top of already being a sporting and commercial asset.
As a result, investors are likely to examine stadiums more closely as strategic assets. Expansion, hospitality facilities and use as multipurpose entertainment venues will be assessed for their long-term revenue potential, with the strongest stadium assets supporting higher club valuations.
Everton’s move into their new stadium is a clear example. Greater capacity means more pre- and post-match spend, and the venue is already attracting bigger concerts and non-sporting events. Stadium earnings are likely to rise significantly as a result.
With matchday income relatively fixed and broadcasting revenue constrained, the greatest scope for growth is likely to come from commercial activity. Clubs with strong international brands can develop their global fanbases and attract international sponsors, while emerging areas such as esports and women’s football offer further opportunities to reach new audiences and generate commercial interest. These are not entirely new strategies, but SCR’s direct link between revenue and squad spending will bring them into much sharper focus.
What about clubs who lease their stadiums?
While stadium ownership adds value, leasing creates an ongoing cost and may place clubs at a disadvantage.
The extent to which clubs with leased stadiums can exploit non-sporting opportunities and add to their earning capacity, will likely be restricted by the following:
- Fee share: Those who lease will likely have to give a portion of earnings to the owners of the stadium, decreasing their revenue takings.
- Legal restrictions: Lease terms and ownership rights may limit the projects clubs can pursue.
Even where a lease contract is flexible, clubs will still have to give a portion of income towards this cost, which places them in a disadvantaged position during valuations.
Academies as strategic intangible assets
Academies have always held significant value because homegrown players carry no transfer fee and are not amortised. This provides a low-cost base, with the future transfer fee realised as profit on any eventual sale.
SCR will reinforce and amplify the value of a successful academy strategy, because it provides these benefits, all while consuming relatively little SCR headroom.
In valuations, academies are likely going to resemble strategic intangible assets: with investors assessing player development capability, recruitment and data systems, academy infrastructure, and the player trading pipeline.
This will place recruitment departments under greater scrutiny, as their ability to identify, develop and sell talent will directly affect both revenue and squad spending capacity. Clubs with strong recruitment models, such as Brighton and Brentford, are therefore well-positioned to benefit.
The January window as a compliance tool
The SCR calculation is understood to be done around March, following the last transfer window of the year (January), but before the end of the season. Because of this timing, clubs will have a clear understanding of their transfer activity and finances immediately after the January window closes. The period is now expected to be used almost as a working capital management window, to understand how a club can adjust and ensure its SCR profile is in line ahead of assessment.
Discipline and the shift toward conventional business valuation
Under PSR, clubs were assessed directly on profitability. While some, notably Tottenham Hotspur, generated genuine profits, many focused primarily on keeping losses within the permitted limit. Although SCR is revenue-led rather than a direct profitability test, it should encourage stronger financial discipline. This may improve free cash flow and profitability, while still allowing clubs to reinvest sustainably in their squads and wider cost base.
Over time, this combination of disciplined reinvestment and more sustainable profitability could make football clubs resemble conventional businesses more closely. Investors may increasingly assess revenue growth, return on investment, operational efficiency, capital allocation and sustainable growth, making traditional valuation methods more relevant.
Historically, investors often focused on how much capital an owner was prepared to inject. Under SCR, attention is likely to shift towards the strength and sustainability of the club’s underlying business model.
This would represent a positive move away from reliance on owner funding and towards a more self-sustaining model.
Will SCR reinforce the advantages already enjoyed by clubs with the largest revenues, or narrow the gap?
The Premier League’s stated intention of the SCR rules is to promote sustainability and competitive balance, but a question worth considering is: to what extent does SCR reinforce the advantages already enjoyed by clubs with the largest revenue? Whether that’s Manchester United’s huge commercial income, or Tottenham’s highly lucrative stadium, some may argue that rather than reducing the gap between the “have and have-nots”, SCR makes revenue generation itself the primary barrier to entry.
We cannot give an answer to this just yet, and it’s something that remains to be seen. What can be said, however, is that regardless of the answer to that question, the focus on revenue generation and the innovation of commercial activity to build a sustainable business model, is clearly advantageous and positive.
How can Price Bailey help?
Squad Cost Ratio has made football club valuation a more technical exercise than it used to be, not a simpler one. Whether you’re assessing an acquisition, preparing a club for sale, or trying to understand what your own spending headroom is actually worth, our Corporate Finance team can help you make sense of it. Get in touch with our experts today using the form below.
We always recommend that you seek advice from a suitably qualified adviser before taking any action. The information on this page is intended as a general guide only. While we work to keep our content accurate and up to date, we cannot guarantee that it reflects the position at the time you are reading it. No responsibility for loss occasioned by any person acting or refraining from action as a result of this material can be accepted by the authors or the firm. For more information on our editorial process, click here.
Sign up to receive exclusive business insights
Join our community of industry leaders and receive exclusive reports, early event access, and expert advice to stay ahead – all delivered straight to your inbox.